How to Protect Against Intellectual Property Issues

Your building is protected from certain risks by property insurance; your employees, by workers’ compensation; and your vehicles, with commercial auto insurance. But what about risks associated with your business’s intellectual property (IP)?

Most business owners know protecting IP is crucial; one of the best ways to do so is with IP insurance. But how exactly does it work?

What is intellectual property? There are four types of IP (with definitions courtesy of Investopedia):

  • Trademark: “A symbol, word, phrase, logo, or combination of these that legally distinguishes one company’s product from any others. Any infringement on a trademark is illegal and therefore grounds for the company owning the trademark to sue the infringing party.”
  • Copyright: “The ownership of intellectual property by the item’s creator. Copyright law gives creators of original ideas, art, etc. the exclusive right to further develop them for a given amount of time, at which point the copyrighted item becomes public domain.”
  • Patent: “A government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time.”
  • Trade secret: “Any practice or process of a company that is generally not known outside of the company.”

What does IP insurance cover? There are two types of coverage to help in the event of alleged IP infringement. One pays the costs of your legal defense if someone claims you stole their IP; the other, the cost of suing someone you believe has infringed upon or stolen your IP.

For businesses centered on ideas or inventions, IP insurance to protect them is essential. Typically, commercial general liability policies exclude IP coverage. Sometimes available as a policy provision, and commonly paired with Errors and Omissions (E&O) policies, there are also stand-alone IP insurance policies.

Who needs it? Any company whose core business is the development of new products should have IP coverage.

For larger businesses, IP insurance is essential because of turnover. Patents can easily expire without anyone noticing, typically after 20 years. IP protection through constant and proper IP designations (think © and ™) is a good preventive measure, but IP insurance functions like liability protection.

All companies should consider IP insurance to protect against claims, especially small businesses, since they are more vulnerable to the costs of legal defense expenses or judgments, where damages can run from $650,000 to $5 million.

Finally, all businesses face employee IP theft risks.

Do you need IP insurance if you’ve correctly registered IP and know your idea is original? If accused, you’ll need to prove ownership of your IP, and IP insurance can help fund the expenses to do that without unneeded and unjust financial strain.

How do I obtain coverage? You must know you haven’t infringed upon anyone else’s IP and be able to prove you’ve conducted an IP search and filed patents, copyrights, or trademarks. You also can’t have any claims or lawsuits filed against or by you.

Contact your commercial insurance advisor to help you navigate the issues around IP.